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Neo-classical Labour

First published in Renewal volume 14, number 1 (2006), pp. 34-41

New Labour has replaced the category of class with an ideology of rational choice.

Many working class people feel disenfranchised by the Labour government: disproportionately they don’t vote; and many are developing a relationship with the BNP. It is possible that the BNP is on the verge of a political breakthrough. Over the last couple of years its support and membership has risen dramatically. It has 21 councillors, it polled 808,000 votes in the European elections and would have secured several MEPs and London Assembly members were it not for UKIP. At the last general election the BNP saved its deposit in 34 constituencies and has made inroads within some of Labour’s traditional working class communities. In London the BNP polled 4.9 per cent in the Assembly elections (Joseph Rowntree Trust, 2005). In seven wards in the Borough of Barking and Dagenham they polled over 20 per cent. Five council by-elections have taken place over the last 18 months – the BNP has won one and come second in the other four – with an average vote of 35 per cent. At the general election in the Barking constituency they collected 4,916 votes – 16.9 per cent; in Dagenham the figure was 2,870 votes – 9.3 per cent.

Discussion of class remains deeply unfashionable within the Labour Party. In contrast, in popular culture the working class is everywhere, albeit successively demonised in comedy or in debate around fear, crime and anti-social behaviour – seen through caricature while patronised by reality TV. Arguably the cumulative effect of this is that the working class itself has been de-humanised – now to be feared and simultaneously served up as entertainment.

The consequences of mass unemployment and failings in the education system have led to generations without work, structured training or even a basic education. Alternatively they remain trapped in low wage, unskilled employment. Yet rather than locate contemporary cultural developments within a wider material analysis of economic and social change the media and our political elites brutally stigmatise the victims. Arguably the Labour Party has colluded in this process through its own retreat from class given the political imperatives of middle England. Yet this process of disengagement is hardly ever dissected or even discussed in the party itself. This is an extraordinary state of affairs given the historic role of the Labour Party as the emancipatory vehicle for the self same working class.

The question remains: is what is offered up by New Labour – in its retreat from class – a necessary prerequisite for a modern social democratic revisionism? The benign interpretation of New Labour positioning considers it a systemic product of our electoral system. However – and this is obviously a heretical viewpoint – would a return to consideration of contemporary class relations and inequality provide for a more durable Labour government?

The genius of New Labour

The common criticism of New Labour from the left is that it is too conservative. In essence, New Labour is no different from, and therefore part of, the neo-liberal right. This thesis assumes that New Labour has accepted the neo-liberal framework and indeed developed this project through the commodification of the public services, the renunciation of redistribution as an act of public policy, its deference to corporate power, its privatisations and the rest. In effect this form of critique assumes that these orthodox political positions are deductively produced out of a neo-liberal philosophical disposition.

Yet arguably this form of critique is at odds with the practicalities of New Labour. For example, the cornerstone of neo-liberal political economy remains the principle of state withdrawal; its basic assumption is that the state cannot be trusted to do better than the market. As such, government itself is not benign – rather it is economically and socially destructive (Marquand, 1988). This is not the hallmark of New Labour. New Labour does actually support the role of the state and retains a core belief in the efficacy of state intervention and action.

An alternative take on New Labour is not to assume it is the product of a body of ideas as such. This alternative approach is to see it as singularly driven by the imperatives of power retention. That is, to see it as the pure logical manifestation of Schumpeter’s famous dictum that the core of democracy lies in the ‘competitive struggle for the people’s vote’ in a similar form that the capitalist seeks to exchange commodities in the marketplace (Schumpeter, 1979). In this model votes are the form of exchange; policies are the commodities themselves; and elected office is the derived profit.

If we return to our earlier example. There is therefore no a priori hostility to the state; rather action is considered legitimate through its derived benefit to the political party in reproducing its political power ceteris paribus. We do not, therefore, see New Labour as a consequential product of a series of philosophical positions but rather as a scientifically pure form of political organisation calibrated for the purpose of winning the votes of the people who matter. Ideas or traditions of thought are only introduced to render intelligible this exercise in political positioning.

Under this approach, the originality – indeed the genius – of New Labour rests in the method by which policy is scientifically constructed out of the preferences and prejudices of the swing voter in the swing seat in order to reproduce itself through dominating middle England – New Labour’s marketplace. Policy is the product of positioning, devised through the rigour of polling rather than the rigour of thought.

Two questions follow. First, what ideas are used to control middle England? Second, does this produce a policy programme at odds with the needs of those outside the tight confines of middle England swing voters? By considering these issues we can isolate tensions between New Labour policymaking and the realities of modern Britain. What emerges is a disturbing picture of how, for the purposes of political positioning, our policy framework is moving further toward an orthodox neo-classical political economy.

Class, New Labour and the knowledge economy

Throughout the 1980s and 1990s Labour’s problems were seen as being associated with failed periods of economic intervention, tax and spend welfarism and union militancy. The defeat of 1992 pushed policy further towards an active ‘supply side socialism’ so as to deal with these polling negatives. This trend intensified with the election of Tony Blair in 1994. Polling increasingly determined policy; policy became an exercise in abstract political positioning driven by the demands of swing voters.

A few key ideologists rose to the task and sought to make sense of Blairite repositioning with reference to a supposed revolution in economic relations luckily occurring just as Blair came to the leadership (Cohen, 2003, 223–47). Most important in the period 1994–97 was the introduction of a new economic and social world view based around the notion of the ‘new knowledge-based economy’ (Leadbeater, 2000). This body of ideas became the axis for New Labour repositioning from 1994 and can still be detected today in the core wiring of the whole New Labour project.

Within this framework, globalisation and new information technologies are widely cited as the key contemporary levers of change in work and employment relations. Some analysts conjure up a haunting spectre of disappearing employment opportunities in the traditional sectors of the economy, and point to growing insecurities, widening social divisions and mass unemployment (Bridges, 1995; Rifkin, 1995, among others).

In contrast, from a UK perspective Leadbeater (2000) is optimistic about the prospects for working life in the twenty-first century. Echoing earlier accounts (for instance Reich, 1993), he argues that the wider application of ‘smart’ technologies and the forces of globalisation are inducing the emergence of a knowledge-driven economy centred on the exploitation of intangible assets: ‘The real wealth creating economy is de-materialising,’ he writes. ‘The private and public sectors are increasingly using the same sorts of intangible assets – people, knowledge, ideas, information – to generate intangible outputs, services and know how.’

The hierarchical structures and internal labour markets that characterised large public and private sector organisations are being supplanted in the new economy by networks of independent, small-scale companies based on cellular, self-managed teams. Leadbeater’s vision, dismissive of established employment patterns, is controversial. Trade unions and other allegedly rigid institutions must adapt or die, for there is no place in the ‘new economy’ for traditional, adversarial industrial relations. With networks supplanting hierarchy, conflicts between worker and boss will become a distant memory. Future economic prosperity will be driven by the expanding production of knowledge and intangible assets, set against the steady erosion of traditional manufacturing and heavy industry.

These commentators assume a rapid growth in scientific, technical, managerial and professional employment and a corresponding decline in traditional manual work. Economic policy shifts to the supply side to help these self-actualising entrepreneurs develop their portable skills. The distinction between worker and employer is withering away as the wage–labour system is consigned to history.

For elements within the Labour Party this ideological analysis of the world of work functionally resolves the historic dilemma inherent in previous Labour governments’ support for manufacturing, as supporting this sector offers diminishing returns. It reinforces, intellectually, an in-built hostility to organised labour and labour market regulation from within the Labour government. Economic policy becomes re-focused on market (and government) failure in the provision of human capital – captured in the famous focus on ‘education, education, education’. Concessions to labour market regulation have to be forced out of the government and are seen as residual trade-offs to appease ‘Old Labour’ – an out-dated hangover from the ‘old economy’.

In a stunning and quite brilliant political move these ideas legitimised the repositioning of New Labour. At a stroke the old negatives are dealt with as they belonged to a previous epoch of industrial work organisation and to a Labour Party that belonged there. As such, New Labour is free from a working class which is literally withering away. Class, inequality and issues of power can be overcome by individual self-actualisation once we overcome the only inequality that matters – access to human capital.

What occurs – for the sake of political positioning – is that the fundamental economic issues that have preoccupied the left for generations are reduced to issues of deficient information and orthodox human capital theory.

The withering away of the working class?

For the architects of the ‘new knowledge economy’ there remains one basic problem – empirical evidence for the withering away of the working class. Over the last ten to fifteen years there has been – according to successive Labour Force Surveys – a slight rise in those jobs that can be considered white collar and above – up from some 35 per cent to 37 per cent of the total stock of directly employed and self-employed occupations in the UK labour market since 1992.

Yet on the same statistical series, manual workers still account for a relatively stable 10.5 million workers – approaching 40 per cent of total employment. If you were to add in clerical and secretarial work then the traditional labour force stands at some 15 million – approaching two in three jobs.

Where are the growth areas in the economy? There has been a slight rise in computer managers, software engineers and programmers. Yet the real growth has been in the long-established services of sales assistants, data input clerks, store keepers, receptionists, security guards and the like. Alongside this has been a massive expansion in cleaning and support workers in the health and education services and beyond, and increased work among the caring occupations – for example care assistants, welfare and community workers and nursery nurses. In short, throughout the last fifteen years there has been no revolution in the demand for labour – rather the key growth areas have been in traditional often low paid jobs, many of which are carried out by women.

What stands out is the emergence of an ‘hour glass’ economy in the UK (Cruddas, Nolan and Slater, 2002; Coates, 2005). On the top half of the hour glass there has been an increase in high paid jobs, performed by those with significant discretion over their hours and patterns of work – in a generalised sense these might be described as knowledge workers. However, in the UK, of more empirical significance has been the trend growth of low paid, routine and much unskilled work in occupations pre-eminent 50 years ago.

The future demand for Labour

Despite the empirical realities of the last fifteen years – and indeed the experience of corporations such as Enron and Worldcom – ministerial speeches are still littered with references to the ‘new knowledge economy’ and much government analysis presumes that future demand for labour is almost entirely driven by high wage, high skilled, knowledge labour. A body of ideas initially used to justify a straightforward political repositioning is now a key template for actual policy-making.

For example, the former education secretary Charles Clarke stated: ‘Demand for graduates is very strong, and research shows that 80 per cent of the 1.7 million new jobs which are expected to be created by the end of the decade will be in occupations which normally recruit those with higher education qualifications.’ Yet this ignores the fact that a high proportion of this relates to NVQ Level 3 and not higher education qualifications. Once this extra growth is taken out then the figure for new jobs by 2010 requiring a degree drops to 55 per cent. Moreover, this does not include demand for so-called replacement jobs – which is five times as high as for new jobs (Campbell et al., 2001, 9).

Overall, when the government’s own statistics are broken down they actually reveal that by 2010 the figure for those in employment required to be first degree graduates or postgraduates will be 22.1 per cent – or 77.9 per cent of jobs will not require a degree. Based on empirical changes over the last fifteen years and the best projections for the future, we are therefore witnessing an ever clearer polarisation within the labour market – the hour glass economy. On the one hand, a primary labour market – or the knowledge-based economy – covering about 21 per cent of jobs. On the other hand an expanding secondary labour market where the largest growth is occurring – in service-related elementary occupations, administrative and clerical occupations, sales occupations, caring personal service occupations and the like.

Policy formation and rational economic man

The preceding analysis exposes a real problem for the architects of New Labour which is increasingly being played out in terms of contemporary policy conflicts within the party. On the one hand, we see a policy-making process that is driven by the preferences and prejudices of swing voters codified increasingly with reference to conservative intellectual traditions and, on the other, the empirical realities of modern Britain, which demand an alternative set of policies in order to confront inequality. For example, take the issue of differential top-up fees. The original problematic was a structural funding one for higher education, the solution being one of levering in more contributions from those who derive an economic benefit from participation.

Options were then systematically polled among key voters. It was agreed that a system of differential top-up fees polled better than a graduate tax. That is because the argument could be presented more effectively in terms of a rigidly individual, utilitarian economic argument that – in the context of an explosion in the demand for graduates – prospective students should discount for the future and borrow more as the future derived yield would expand in the new knowledge-driven, classless world of New Labour. It is a rational economic move for a rational economic man or woman to borrow to accumulate greater reward financially.

Yet empirically if you start with a different proposition – that there will be a limited demand for graduates – then your solution to the funding gap is different – you would tax the job that requires the degree rather than the person who seeks to participate in higher education – as there will be an excess supply of graduates. Yet this rests on a different departure point – not one of rational economic man, but one of the liberating potential of education and human knowledge driven by concerns over and above the cash nexus and rational, individual economic exchange.

Arguably this example exposes a critical modern fault line within the party. The economic framework that was incorporated to make sense of the repositioning of the party, but which is at best empirically questionable, is now used to actually forge the policy agenda itself. While this may play well for pivotal elements within the electorate, it further dislocates the policy process from the empirical realities of modern Britain. Critically, the way this process rolls out pushes us into an ever more elaborate framework of rational choice economics which, paradoxically, is the hallmark of right wing economics dating back to the 1870s. We end up back where we started when we discussed the ‘new knowledge economy’ – the classless world of individual, rational economic exchange and mutual benefit.

The onward march of neo-classical Labour

In the same way that the neo-classical takeover of modern economics removed any political insights supplied by Marx, Smith, Mill and Ricardo, so have ‘new economy’ theorists performed an equivalent political exercise for New Labour. In both instances the consequence has been the removal of class as an economic or political category. Instead the dominant paradigm is one based around rational, atomised economic exchange.

This process began with an attempt to codify intellectually a straightforward move to the political centre. Since then, however, these self-same ideas have had an ever more systematic influence over public policymaking. The most obvious example of this process is in the current debate around the efficient allocative properties of markets and the reform of health and education policy. Once again, the language of choice is used because of the traction it creates among ruthlessly polled swing voters. Policy is then built around these buzz phrases with reference to rational choice analysis developed by marginalist theories of efficient exchange – in education around the form of parent power, in health around patient choice.

This deeply ideological agenda is disguised as a progressive devolution of power down to the working class in order to placate internal concerns. This is an exact replica of the form by which neo-classical economics scientifically defines the brilliance of the market. Space does not permit greater elaboration, but in essence these policies contain the same fundamental weaknesses as the neo-classical framework that has produced them – assumptions of perfect information; the psychology of rational choice and the way an economic subject discounts for the future; the empirical realities of class, race and inequality; the role of intermediary institutions and market imperfection; and so on (see, for example, Lipsey, 2005). This reflects an increasingly ideological project born out of the exercise of political positioning at the expense of an evidence-based, rational form of public policy-making. Recent criticisms of policy on the basis of a lack of evidence are a reflection of this (Denham, 2005).

Further tensions emerge when we try and make sense of people’s involuntary inactivity or indeed their lack of opportunity. Within the neo-classical frame of reference these remain elusive concepts – beyond the explanatory power of the framework. Either people do not understand their own preferences or fall foul due to imperfect information. We tend to reduce our approach to one of providing fresh incentives or compulsions on those who are often the victims of broader economic and political forces. It is a short hop to actually blaming the victim for their own predicament – again an element in current debate around work, leisure and welfare. These people, in turn, can then be served up on the altar of middle England. Indeed we can stray into all sorts of interesting territory in terms of crime and anti-social behaviour, which plays to the prejudices of the voters that really matter and reinforces a condescension for the working class lifestyles dominant in public debate. The notion of a lawless, modern ASBO nation reinforces our political bona fides with regard to our core middle England constituency.

Concluding remarks

It is a common observation that New Labour is efficient at winning elections due to its ruthless scientific analysis of the preferences and prejudices of the swing voter in the swing seat and our key seat organisation. It is another common observation that many working class people are rendered invisible by the current political system – they appear to have no voice (Toynbee, 2003). When we even acknowledge the existence of a working class it tends to be demonised – in almost the exact parallel to that of the migrant – so as to reproduce the political power of New Labour within its middle England marketplace.

Since the election two responses can be identified within New Labour to legitimise itself. The first is to restate empirically that there is no alternative to the further development of the New Labour strategy (Byrne, 2005). The other is to seek to rewrite the whole geneology of New Labour and see it anchored within the revisionist traditions of democratic socialism and the Labour Party (Diamond, 2005).

The former simply argues for an ever more elaborate version of the familiar New Labour architecture. The latter is a more interesting contribution because of its focus on equality. Yet this fails to comprehend how the evolution of New Labour is fundamentally at odds with this tradition of thought; the revisionist tradition of democratic socialism was constructed as a critique of neo-classical political economy. In stark contrast, core elements within New Labour have actually built a neo-classical Labour project.

The objective now is to build a modern New Labour project grounded in the empirical realities of the modern world and not some stylised construction of modernity that scientifically seeks to entrench class and income inequality with recourse to some spurious heuristic device known as ‘rational economic man’.

References

Bridges, M. (1995), Job Shift: How to Prosper in a Workplace Without Jobs, London, Nicolas Brealey.